JPMorgan Chief Risk Officer Hogan to Take Temporary Leave

By Dawn Kopecki -
Jan 26, 2013

JPMorgan Chase & Co. (JPM) Chief Risk
Officer John Hogan, whose tenure included the bank’s worst-ever
trading loss, will take a temporary leave for personal reasons
beginning later this month, he said in a memo to staff.

“I’m looking forward to taking this time off to spend with
my family and friends,” Hogan wrote in a memo obtained
yesterday. Deputy Risk Officer Ashley Bacon will fill in until
Hogan returns this summer, he said. Hogan discussed his plans
with top managers including Chief Executive Officer Jamie Dimon,
he said.

Hogan, previously chief risk officer for the investment
bank, took his post a year ago, about three months before the
New York-based company disclosed a large and illiquid trading
position at the chief investment office. The holdings lost more
than $6.2 billion in the first nine months of last year and
JPMorgan’s market value dropped more than $50 billion in the
weeks after the so-called London Whale episode become public.

The contents of the memo were confirmed by Joe Evangelisti,
a spokesman for JPMorgan, which ranks first by assets among U.S.
lenders. The stock gained 1.7 percent yesterday to $47.16 in New
York.

The bank, in a 129-page internal report released Jan. 16,
described an “error-prone” risk-modeling system in the CIO
that required employees to cut and paste electronic data to a
spreadsheet. Workers inadvertently used the sum of two numbers
instead of the average in calculating volatility. The firm also
reiterated that London traders tried to hide losses.

Risk Models

The company found more flaws with its risk-modeling systems
in other divisions over the course of the almost eight-month
review that Dimon, 56, said the bank is fixing.

The report blamed managers, many of whom were reassigned or
left last year, for roles in failing to halt the loss. The
executives include former Chief Investment Officer Ina Drew,
Barry Zubrow, ex-head of companywide risk management, and former
Chief Financial Officer Doug Braunstein.

“Mr. Dimon bears ultimate responsibility for the failures
that led to the losses in CIO and has accepted responsibility,”
the bank said.

Hogan, who declined to comment, was among top executives
who questioned Dimon in the years after the financial crisis
about why the CIO didn’t have as extensive or robust risk
controls as other departments, people who witnessed or
participated in those conversations said last year.

The report said that Hogan, 46, “did not have sufficient
time to ensure that the CIO risk organization was operating as
it should. Nevertheless, the Task Force notes that there were
opportunities during the first and second quarters of 2012 when
further inquiry might have uncovered issues earlier.”

Hogan received a bonus for his work in 2012 that included
77,287 shares of restricted stock valued at $3.6 million when
they were awarded on Jan. 17. He received 95,212 shares the year
before that were worth $3.4 million at the time.